Property Sale By Tender – 2019 Guide [Pros/Cons]

Selling your home can be a time-consuming and emotional experience, so it’s vital to be well informed from the outset. You can choose from a variety of methods to ensure you sell to the highest bidder, but a method gaining in popularity is selling by tender.

Despite its popularity, a sale by tender can be risky, so it is important to understand the complexities of the tender process before opting for this route. With the right information in hand and a supportive, informed agent, you can ensure you choose the optimal method for selling your property and secure the highest sale price.

Property Sale Methods

The top three methods for selling a home are:

  1. Auction
  2. Tender
  3. Private Sale

Most people are familiar with property auctions, which are renowned for their hyped-up atmosphere and immense pressure on parties to both buy and sell. Private sales are often preferred when sellers feel intimidated by auctions and many properties are sold via this method. In contrast, sale by tender is often an unknown or forgotten sale method. However, it can offer a more suitable avenue for unique or high-end residential properties and can help sellers achieve the highest possible price for their home.

All three options have advantages and disadvantages and the right one for you depends on your unique situation. For this reason, it is often a good idea to find an experienced, local agent to help guide you along the right path to finding your ideal buyer. Click here to compare your local agents.

what are the different fee structures

What Does Sale By Tender Mean?

As with an auction, a sale by tender relies heavily on the competitive nature of potential buyers. The key difference between the two lies in the secrecy of tender offers, which can be either beneficial or detrimental to finding a suitable buyer. The anonymous tender process ensures buyers do not base their offer on those of other buyers but rather on their own perceived value of the property.

For a great explanation on what sale by tender is and why you might want to consider it, watch this video by Harcourt Brock real estate, who specialise in luxury properties in South Australia.

To encourage competition, the seller always sets a deadline for offers. This often urges prospective buyers to put in their best offer immediately, as a looming deadline means they only have one shot at securing the property. These factors often help sellers achieve a higher sale price, but this is not always a guarantee.

The process for selling by tender is as follows:

Step 1: The seller lists the property for sale through the appropriate channels.

The listing includes the due date for tender applications and any other relevant tender information.

Step 2: The seller markets the property to prospective buyers at inspections.

Interested parties can attend an inspection before submitting a tender. This provides an opportunity for the seller to engage potential buyers and market the property. It is also an opportunity to discuss any particulars, including terms and conditions, before the buyer submits an official tender.

Step 3: Prospective buyers complete a tender form by the due date.

Offers are submitted to the seller using an official tender form, which usually includes price, interest rates and special terms and conditions. The tender documents are sealed in an envelope for secrecy and often include a deposit and tender submission fee.

Tender forms differ between states and agents; however, you can see a generic example here.

Step 4: The seller opens all tender submissions after the due date.

The seller must wait until the due date has passed before viewing all offers together and deciding on the best one. The best offer does not always equal the best price – offers are considered based on price and any conditional terms included in the tender document. One example of a typical term and condition is the presentation of a building approval certificate.

Step 5: If an offer is suitable, the seller accepts and the house is sold.

A tender submission is binding once the seller accepts. Depending on the state of purchase, tenders are usually subject to a cooling off period, ranging from two to five days.

Step 6: If no suitable offers are present, the seller can negotiate or reject all offers.

A seller and prospective buyer may come to an agreed price that is above the initial offer, in which case the seller will decide to sell. If this doesn’t happen, the seller is free to begin the process again or choose an alternative sale method.

Is Sale by Tender Right for Me?

Sale by tender is usually reserved for high-end residential properties or unique properties with an indeterminable market value. However, the sale by tender method is not restricted to these cases and can be used in any situation where a seller feels it would be beneficial. A local agent with expertise in selling by tender can help determine whether this method is right for your particular situation. They will consider the following factors:

  • Property type
  • Location
  • Current property market
  • Urgency of the sale

A successful sale by tender is dependent on an effective marketing campaign. Prospective buyers must be made aware of your property within a relatively short timeframe and the campaign must generate a buzz to enhance the competition element. Engaging an experienced agent will also help you ensure an effective marketing campaign leading up to the tender submission deadline.

Advantages of Selling by Tender

The benefits of selling your property by tender are numerous. Depending on your unique situation, this method could bring you a high sale price and a quick, easy sale. However, be sure to read about the potential drawbacks below, as selling by tender doesn’t work for everyone.

Potential benefits include:

  • Unbiased offers
    Properties offered for sale by tender do not normally include a sale price in the listing. This means buyers are unable to compare your home with others in the area and will submit an offer based only on their own perceived value of the property.
  • Higher-than-expected offers
    As all offers are kept secret, buyers are unaware of the price other buyers are offering to pay for the property. This often leads to one or more offers that are substantially higher than other offers.
  • Competitive-based offers
    Buyers may be encouraged to submit a higher offer when they notice many other interested parties inspecting the property.
  • Limitless offer potential
    Bidding at an auction always stops when the competition stops. Therefore, offers are often higher when selling by tender, as this cannot happen. Prospective buyers must anticipate the value of the property and the offers made by other interested parties, which usually means they immediately offer the maximum they are willing to pay.
  • Short, effective marketing campaign
    Selling by tender always involves setting a due date for tenders – usually in the near future. Marketing campaigns must be maximised for effectiveness during this short period, which often saves time and money by keeping the selling process short.
  • True market value
    Some properties are quite unique and it can be hard to determine an accurate market value. For such properties, the tender process can indicate the true market value of a unique property for the seller. The seller can then adjust their expectations accordingly.
  • Seller control
    The seller is not obligated to accept the highest offer and can, instead, use this knowledge for future negotiations. Sellers can extend the offer deadline whenever they like, which can help when there are fewer offers than expected. Sellers also have more control over marketing campaign costs by setting a deadline that limits advertising time and expenditure.
  • Stress-free sale
    Sellers are not pressured to make an immediate decision, like they are during an auction. Instead, they can view the offers in a relaxed setting and take time to discuss all options with their selected agent. This reduces the possibility of a regretful sale and gives the seller time to consider what price and terms best suit their particular situation.
  • Cash sale
    All sales by tender are cash sales. This means prospective buyers already meet finance requirements when they place an offer. Sellers can view each offer as a potential sale and will not need to spend time on prospective buyers who are unable to gain finance approval.
  • Invisible competition
    At an auction, the competition is visible, so the price only rises to the desired amount when two bidders compete against each other. Contrary to this, the tender process only requires one interested party to ensure a potentially suitable offer because the competition is invisible. Interested parties are only aware of their own offer and must, therefore, submit their highest price to try and secure the sale.
  • Access to more buyers
    Sale by tender creates a more comfortable offer process for prospective buyers who cannot or will not attend auctions. This often means sellers will receive offers from interested parties who would not feel comfortable bidding at an auction, thus reaching more potential buyers.

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Disadvantages of Selling by Tender

Despite the numerous benefits often associated with selling by tender, it is still considered a risky process. Having an agent to guide you can help significantly and ensure you minimise the risks involved when selling your home.

Potential drawbacks include:

  • Uninformed offers
    The secrecy involved in selling by tender can sometimes be to the seller’s detriment because buyers are not informed about the true value of the property. This can lead to lower-than-expected offers and undermine your efforts to sell your home.
  • Drawn-out sale process
    A suitable offer is not guaranteed and a seller can often be unsatisfied with the offers received. However, when an offer is close enough to the desired sale price, a seller may choose to negotiate further with that particular party. Although this offers another avenue for creating a sale, it can often be a long, drawn-out process and result in a time-consuming sale.
  • Expensive marketing campaign
    Although marketing time-frames can be limited and, thus, advertising costs reduced, an intensive campaign can sometimes end up costing more. This happens when every possible avenue is explored to create as much hype about the property as possible in a very short time.
  • Fewer prospective buyers
    A short marketing campaign, however intensive, reduces the time given to inform prospective buyers. This can sometimes lead to fewer interested parties and fewer offers, purely due to a lack of awareness of the property.
  • Process ends in a no sale
    When no suitable offers are received, the process can result in the property being unsold. A no sale also happens when prospective buyers are not willing to further negotiate or when an agreed price cannot be met. Although sellers can restart the sale-by-tender process or choose an alternative method, the unsuccessful result is disappointing. It often means lost time, which can be important when a quick sale is needed, and wasted money.

Looking To Sell Your House?

We understand that choosing a method to sell your house can be difficult – there seem to be so many options and you might not know which is the best fit, especially if this is the first time you’re looking to sell.  If you are looking to sell your property, you should speak to a real estate agent about it. They’ll know about the market in your area as well as how much attention your property is likely to attract.

We can recommend top local agents who will be able to help you make these important decisions. They’ll also be able to tell you if they think that selling privately or selling by auction would be a better method for you. Compare top-selling agents quickly by visiting our homepage now.